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Walmart-backed fintech One introduces ‘buy now, pay later’

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Walmart-backed fintech One introduces 'buy now, pay later'

Customers shop at a Walmart Supercenter on February 20, 2024 in Hallandale Beach, Florida.

Joe Raedle | Getty Images News | Getty Images

Walmarts Fintech startup with majority ownership A has started offering buy now, pay later loans on high-priced items at some of the retailer’s more than 4,600 U.S. stores, CNBC has learned.

This step puts One in direct competition with To confirmthe BNPL leader and exclusive provider of installment loans for Walmart customers since 2019. It’s a relationship that the Bentonville, Arkansas, retailer extensive Affirm was recently introduced as a payment option at Walmart’s self-checkout kiosks.

It also likely signals that there is a battle brewing in the aisles and e-commerce portals of America’s largest retailer. At stake is the role of a broad spectrum of players, from fintech companies to card companies and established banks.

One’s move into lending is the clearest sign yet of its ambition to become a financial super app, a mobile one-stop shop for saving, spending and borrowing money.

Since it eruption appearing on the scene in 2021, enticing Goldman Sachs veteran Omer Ismail As CEO, the fintech startup has intrigued and threatened a financial landscape dominated by banks – and poached talent from more established lenders and payments companies.

But the company, based in a cramped WeWork space in Manhattan, operated largely in stealth mode during early development Productsincluding a debit bill issued in 2022.

Now One is going head-to-head with some of Walmart’s existing partners, like Affirm, which helped the retail giant generate $648 billion in revenue last year.

Walmart’s Fintech startup One is now offering BNPL loans in Secaucus, New Jersey.

Hugh Son | CNBC

During a recent CNBC visit to a Walmart location in New Jersey, ads for both One and To confirm competed for attention between the Apple products and Android smartphones in the store’s electronics department.

Offers from both One and Affirm were available at checkout, and loans from both providers were available for purchases starting around $100 and costing as much as several thousand dollars at annual interest rates between 10% and 36%, according to their respective websites.

Electronics, jewelry, power tools and car accessories qualify for the loans, while groceries, alcohol and guns do not.

Buy now, pay later has become popular with consumers, both for everyday items and for larger purchases. According to Adobe Analytics, BNPL generated $19.2 billion in online spend from January through March of this year. That is an increase of 12% year on year.

Walmart and One declined to comment for this article.

Who stays, who goes?

Walmart’s expanding role raises the possibility that the company could force Affirm, Capital One and other third parties from some of the most coveted partnerships in U.S. retail, according to industry experts.

“I have to imagine the goal is to have all of these things, whether it’s a credit card, buy now, loan pay later or transfers, all unified in one app under one brand, delivered online and through the physical footprint of Walmart.” said Jason Mikulaa consultant who previously worked in Goldman’s consumer division.

Affirm declined to comment on the partnership with Walmart. Shares of Affirm rose 3% on Tuesday, rebounding after a more than 8% decline in premarket activity.

For Walmart, One is part of its broader effort to develop new revenue streams outside of stores in areas such as finance and healthcare, following rival from Amazon playbook including cloud computing and streaming. Walmart’s newer businesses have higher margins than retail and are part of its plan to grow profits faster than sales.

In February, Walmart said it was acquiring TV maker Vizio for $2.3 billion to boost its advertising business, another growth area for the retailer.

‘Bank of Walmart’

When it comes to finance, One is just Walmart’s latest attempt to break into the banking industry. Starting in the 1990s, Walmart made repeated attempts to enter the industry through direct ownership of a banking arm have been blocked at every turn by lawmakers and industry groups concerned that a “Bank of Walmart” would crush small lenders and squeeze out big ones.

To sidestep these concerns, Walmart took a more hands-off approach this time around. For One, the retailer has formed a joint venture with investment firm Ribbit Capital – known for backing fintech companies, including Robin Hood, Credit Karma and Affirm – and staffed the company with executives from across the financial world.

Walmart did not disclose the size of its investment in One.

The startup has said it makes decisions independently of Walmart, although its board includes Walmart’s U.S. CEO John Furner and its chief financial officer, John David Rainey.

They do not have a banking license, but they work together with Coastal Community Bank for the debit card and installment loans.

After failed early efforts in banking, Walmart pursued a partnership strategy, working with a constellation of providers including Capital One. Synchrony, MoneyGram, Green dot, and more recently Affirm. Relying on partners, the retailer opened thousands of physical MoneyCenter locations in its stores to offer check cashing, sending and receiving payments, and tax services.

From paper to pixels

But Walmart and One executives have made no secret of their ambition to become a major player in the financial services industry by outpacing existing players with a clean slate.

One’s no-fee approach is especially relevant for low- and middle-income Americans who are “financially underserved,” says Rainey, a former PayPal executive branch, noted at a conference in December.

“We see a lot of those demographic customers, so I think that gives us the opportunity to participate in this space in a way that others might not,” Rainey said. “We can digitize many of the services we physically perform today. One is the platform for that.”

According to the report, this could generate roughly $1.6 billion in annual revenue from debit cards and loans in the short term, and more than $4 billion as it expands into investments and other areas. Morgan Stanley.

Walmart can use its scale to grow One in other ways. It is the largest private employer in the US with approximately 1.6 million employees, and already offers its employees early access to wages if they sign up for an enterprise version of One.

Walmart’s next card

There are signs that One is moving deeper into lending beyond just installment loans.

Walmart recently had the upper hand in a legal dispute with Capital One, allowing the retailer to end its credit card partnership years ahead of schedule. Walmart indicted Capital One claimed last year that its exclusive partnership with the card issuer was null and void after it failed to meet contractual customer service obligations, claiming Capital One denied this.

The lawsuit led to speculation that Walmart plans to have One take over management of the retailer’s co-branded and store cards. In legal filings, Capital One itself claimed that Walmart’s rationale was less about handling complaints and more about moving transactions to a company it owns.

“Based on information and belief, Walmart intends to offer its branded credit cards through One in the future,” Capital One said last year in response to Walmart’s lawsuit. “With One, Walmart is positioning itself to compete directly with Capital One in providing credit and payment products to Walmart customers.”

A Capital One Walmart credit card sign is seen at a store in Mountain View, California, United States on Tuesday, November 19, 2019.

Yichuan Cao | Nurfoto | Getty Images

Capital One said last month that this was possible appeal the decision. The company declined to comment further.

Meanwhile, Walmart said Last year, as the lawsuit became public, the company soon announced a new credit card option with “meaningful benefits and rewards.”

According to the documents, One has obtained a lending license that will allow it to operate in almost every U.S. state website. The company’s app tells users that credit building and credit score monitoring services will be available soon.

Catching Cash App, call

And while One’s expansion threatens to replace Walmart’s existing financial partners, Walmart’s efforts can also be viewed as defensive.

Fintech players included Block Cash App, PayPal and Chime dominate account growth among people switching bank accounts and have made their way into Walmart’s core group. According to data and consultancy firm, the three services accounted for 60% of digital player registrations last year Curinos.

But One has the advantage of being majority owned by a company whose customers make more than 200 million visits per week.

It can offer them enticements, including 3% cash back on Walmart purchases and a savings account that pays 5% interest annually, much higher than most banks, according to emails from One customers.

These terms keep customers spending and saving within the Walmart ecosystem and help the retailer better understand them. Morgan Stanley analysts said in a 2022 research note.

“One has access to Walmart’s extensive and loyal customer base, the largest in the retail industry,” the analysts wrote. “This captive and underserved customer base gives One an advantage over other fintechs.”

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